Surge in US dollar on FED Path, financials lead | Calamatta Cuschieri

The Federal Reserve raised the interest rate by 25 basis points and projected three more hikes next year

In Europe

Markets in Europe ended the session in the green on Thursday after the Federal Reserve (FED) raised the interest rate by 25 basis points and projected three more hikes next year thus signalling a faster than expected tightening cycle in 2017. The German DAX settled at 1.08% higher, as Deutsche Bank AG outperformed, soaring 5.36%. In Paris, the CAC 40 jumped 1.05% as financials topped the list of best performers. The Italian index also led by financials closed 2.09% higher.

In the United Kingdom, British policymakers left the levels of quantitative easing unchanged and kept the benchmark interest rate at 0.25%. In a statement today, the Bank of England confirmed the decision was unanimous. The rate-setters now forecast a slightly lower path of inflation, since consumer prices did not rise as expected. The bank forecast a target inflation rise of 2% by the end of the second quarter in 2017.

The British pound lost more ground against the dollar after the Bank of England announced the no change in interest rates. The pound had already decreased earlier on a stronger dollar, boosted by the US interest rate hike.

On Wall Street

US markets extended their opening gains as the market digested the FED’s interest rate outlook and a raft of positive economic data releases. Markets also assessed the dramatic pick up in the manufacturing activity, which showed strong gains in November. Following the news, the Dow Jones index steamed towards the 20,000 mark, with Goldman Sachs, JP Morgan Chase and Apple leading the group.

The US government bonds continued their sell-off, sending the bond yields up, thus indicating higher interest rates in the near future. The yield on the 10-year Treasury edged up to around 2.59%. The two-year bond, which is more responsive to changes in monetary policy advance to around 1.269%.

Oily corner

Energy prices traded in the red as the US dollar grew stronger. Oil traded lower despite the Organisation of the Petroleum Exporting Countries (OPEC) deal to freeze crude output. Since the US dollar is crude’s main currency, the greenback’s higher value will likely make oil trade in other currencies more expensive.

West Texas Intermediate for January future shed 0.86% to trade in the region of $50.55 per barrel. Meanwhile, international benchmark Brent for settlements in February lost around 0.52%, changing hands in the regions of $53.60 per barrel.

21st Century bid for Sky Plc

Twenty-First Century Fox, Inc. reached a deal with Sky Plc to acquire the British media company for £11.7 billion, or £10.75 per share. Fox already has a 39.1% share in Sky and with today’s bid; the company will gain the full control. Twenty-First Century Fox, Inc. will be worth £18 billion. Sky’s management encouraged its shareholders to accept the offer received last week. The companies expect to complete the transaction by the end of 2017. However, this may result in an investigation into the acquisition since the Fox owner Rupert Murdoch will have control on a large proportion of the media in the country.

This article was issued by Rodrick Duca, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investments Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.